Expectation of monetary policy switch buoys yen

Bloomberg News Service

The yen headed for the biggest weekly advance in two years against the dollar yesterday on speculation Japan is reducing sales of its currency as the economy recovers.

The world's second-biggest economy last quarter grew at its fastest pace in 13 years, as consumer spending and business investment climbed, spurring overseas demand for Japanese shares.

Japan's yen-selling "was unsustainable, and now that we're seeing the economy doing better and stocks rising, the need for monetary easing (via currency sales)" has diminished, said Harriett Richmond, who oversees $50 billion as head of currency management in London at J.P. Morgan Fleming Asset Management.

Japan's currency was trading at 106.94 yen per dollar at late morning London time from 106.82 yesterday in New York, according to EBS prices. It has gained 3.6 percent this week, the most since March 2002.

A stronger yen is good for Hawai'i. Japanese currency goes further when tourists book hotel rooms or airline flights, encouraging more travel and spending.